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Wages can be determined through the following: the forces of demand and supply in a market economy; government activities and policies and the activities of trade union. A very comprehensive understanding about these factors gives a clear picture on how determination of wages greatly influences the labor market.

The forces of demand and supply in a market economy: The wages of labor in a market economy can be determined through the forces of demand and supply. In a competitive labor market, there are so many employers and unorganized employees resulting in a situation where a single employer or employee cannot influence the wage rate either by refusing to be employed or to employ. Wage rate in a competitive labor market can be determined in the following manner:

1. When the supply of labor exceeds the demand, wage rate will fall.

2. When the demand for labor exceeds the supply, wage rate will rise.

When the demand, for labor equals the supply, wage rate will be favorable to both employer and the employee.

Government activities and policies: Government institutions and wage commissions set up by government help in determining wages, especially in the public services. In fixing wages, the government agency or wage commission takes the following factors into consideration.

1. Cost of living: The higher the cost of living, the higher wages are likely to be. If workers spend so much to get the essentials of life, then there is need to pay workers higher wages to enable them meet up. Imagine when you do the opposite-how would the labor market be affected?

2. Level of productivity: The greater the level of production in the country, the higher the wage rate. Definitely, you do not expect staff of an industry to play cool with you when they work an average of 8 hours for 6 days of the week bringing an annual returns of billion of US dollars and yet you pay them a ‘summer-job’ wages.

3. Type of occupation: The wage structure varies from one occupation to another. The wage structure for each category of labor is based on degree of scarcity of labor, the risks involved, etc. So various salary grade levels are fixed for different categories of labor in the civil service.

The activities of trade Unions

A trade union is association of workers formed to enable the members to take collective, rather than individual, action against their employers in matters relating to their welfare and conditions of work. They are formed by workers who seek protection and promotion of their interests. Examples of trade unions are

1. Air Line Pilots Association (ALPA)

2. Associated Actors and Artistes of America (4As)

3. American Federation of Teachers (AFT)

4. American Federation of Musicians of the United States and Canada (AFM)

To secure good wages for members; to participate in policy formulation of their respective organizations; to secure employment for those members who have no jobs; Trade unions also make it their responsibility to safeguard the interests of members and they also regulate the entry qualifications into the various professions.

Weapons that can be used by Trade Union during a trade dispute

trade unions can insist on achieving their objectives during trade dispute by using the following weapons or methods.

1. Collective bargaining: In this method, representatives of the union and employees will meet to negotiate or deliberate on issues affecting the workers.

2. Work to rule: This involves the slowing down of rate of work by the worker. They will come to work but the rate of work will be slowed down by the workers.

3. Picket lines: This involves the workers staying at the entrance of the factory and refusing to work.

4. Threat to strike: The workers’ union gives ultimatum to the employer that they will embark on strike if their demands are not met on time.

5. Strike: The workers will stay away completely from work. This is the ultimate weapon and sincerely will greatly affect the labor market and hence production.

Employers’ Association

Employers’ association is formed to enable members adopt a common policy in labor negotiations. A good example of employers association in the United Kingdom are Confederation of British Industry (CBI) and Federation of Small Businesses. While trade Unions are usually interested in negotiations about wages increases and improving the working conditions of workers, employers’ associations are normally interested in discussing ways of increasing productivity. Through collective bargaining on these matters, mutual agreements are reached by both the trade union and employers’ association.

Weapons used by employers’ association during a trade dispute

Employers’ association can insit on achieving their objectives in trad dispute by using the following weapons or methods.

1. Collective bargaining: In this case both the employers’ association and the trade union representatives will meet to discuss the workers’ demand.

2. Strike breakers: In this method, the employer will use some workers to operate the plant during the period of strike

3. Blacklist: All workers who participate in strike action will be dismissed.

4. Lock-out: This involves the closing down of the factory by the employer until the dispute is resolved.

Do you have any doubt to how the Labor can be greatly influenced or affected through these afore-mentioned factors?